Hospital Environmental Analysis - Assignment Example

Hospital Environmental Analysis Introduction Hospital administration requires that one is aware of the organization’s environment and its forces, which impact on the strategic direction of the facility. Because of the dynamic nature of these forces and their changing influence on the hospital’s environment on a day-to-day basis, this is not an easy task for administrators (Healey & Marchese, 2012). This is because the administrator must not only be aware of the organization’s internal environment, but also of those changes occurring in the external environment. When these changes are occurring all the time, it becomes increasingly difficult for the administrator to understand them and work to ensure that they do not affect the competitiveness of the organization. Moreover, Healey and Marchese (2012) note that it is unrealistic to expect hospital administrators to be aware of all these changes, specifically those changes that impact on the environment of the hospital. Therefore, as administrators continue to manage internal factors that influence their hospital facilities, Ginter et al (2013) ask whether it is realistic for the same administrators to be cognizant of their external environment at the same time. The answer to this is that hospital administration requires not only the management its internal confines, but also anticipation and management of factors and trends on the outside that impact the hospital’s operations and competitiveness. External Forces that Influence the Hospital Changes in the political and economic environment, which are external to the hospital, need to be evaluated by the administrator for them to understand how they will impact the strategy and competitiveness of the hospital. The political environment is dynamic and constantly changing. For example, every hospital administrator is aware that the briefs received from state agencies, along with the Centers for Medicaid and Medicare result in substantial requirements for paperwork that must be understood, assessed, addressed, and implemented (Noh et al, 2011). However, there are also other political forces that are not directly linked to the healthcare sector that could portend formidable impact on the hospital’s environment. Elected officials and special interest groups may not view the issue at hand, such as obesity, from the same perspective, normally espousing competing and diverse interests. Moreover, the partisan agenda of the Republican and Democratic Party also have to be factored into the assessment of the hospital’s environment, particularly because the party that holds a majority has the political advantage in affecting healthcare policy. Indeed, politics is the main determinant of how scarce resources are allocated. Political interactions occur when individuals involved in the decision-making process compromise and take actions that decide on the allocation of resources in healthcare (Noh et al, 2011). Economic factors also have a significant impact on the hospital’s environment and operations and, as with political factors; this environment is also influenced by more than the direct economic factors. The hospital administrator must be aware of indirect economic factors prominent at the federal and state level, meaning that they must keep up-to-date with macroeconomic factors that impact the provision of healthcare (Noh et al, 2011). Macroeconomic decisions at the federal and state level influence not only the intended population, but also other areas like healthcare provision. Thus, a change in monetary or fiscal policies at federal level impact on interest rates or tax rates may affect reimbursement policies in the healthcare environment, while reallocation of state budgets also influences the hospital environment economically. Hospitals as part of the healthcare industry are a critical component of the state and federal US economies. Cyclical contractions in the state and federal economies and local market factors may, at times, lead to different pressures on the organization and supply of delivery systems for healthcare, hospital suppliers, and the practitioners (Noh et al, 2011). Effects of economic shifts may include changes in access to or demand of healthcare services, as well as the financial status of practitioners and the hospital. Internal Forces that Influence the Hospital Possibly the most influential internal factor that continues to affect hospital facilities is lowered margins, specifically as a result of steadily declining reimbursements. Although lower reimbursements may be viewed as an external force, the use of these funds is an internal factor that hospital administrators must manage (Noh et al, 2011). As staff shortages have increased wages and price increases from various vendors have increased due to increased technology costs, hospitals have seen their profit margins decrease. The use of funds from federal and state sources in service delivery decisions, such as oncology vs. cardiology, has had a significant impact on the internal environment. Along with weakening hospital infrastructure, as well as socio-political factors in the hospital’s management structure, administrators are faced with mandatory hospital redesign due to declining fortunes in the healthcare sector. Noh et al (2011) argue that a growth in volume should also result in a growth in profitability, noting that the reason why increasing demand in hospitals fails to result in enhanced hospital performance is difficult to understand. Organizational culture is another internal factor that influences the hospital’s environment, especially since it has a significant impact on how the hospital interprets threatening scenarios and factors (Noh et al, 2011). Organizational culture determines the staff’s ability to positively accept change brought about by dynamics in the external environment. A feeling of disengagement from the organization, lack of trust, and poor morale are all factors internal to the hospital that affect the facility’s ability to succeed due to reforms and they are all influenced by the prevailing organizational culture. Hospitals that turn to staff reductions as an immediate response without clear action plans that involve the staff, in this case as a result of an organizational culture that does not support staff involvement in decision-making, may result in lack of trust from the staff in the hospital’s ability to tackle future events appropriately (Noh et al, 2011). Secretive administrators and senior management also risks creating distrust between employees and the hospital’s management, as opposed to an organizational culture that supports open communication and keeps staff informed of events that could affect their collective future. Impact of External and Internal Factors on Competitive Strategy Development Unpredictable changes that occur on the political and economic level are externalities of the hospital as discussed and these directly influence the hospital’s operations, ease of client access to services, demand, competitiveness, business objectives, and subsequent cash flow. These causes act towards restraining the hospital’s business growth, performance, and profitability, which also influence the strategy used by the hospital to maintain their competitiveness (Wijngaarden, 2012). Hospital administrators and management can minimize these affects by choosing business strategies that enhance their competitiveness. Effects of the external environment and the dynamic nature of the healthcare market with rising demand for services and decreasing funding, for example, may be tackled through implementation of an innovative strategy approach to attract paying clients. The hospital’s competitive strategy, therefore, is developed by taking the improvement of services seriously, specifically by differentiating their services from competitors to achieve their pre-established organizational strategic objectives and goals. Changes in the economic environment, for example, may require that the hospital improves their service offerings to remain competitive, such as a move from budget pricing strategies to differentiation (Wijngaarden, 2012). The internal environment also influences competitive strategy in the hospital setting. The hospital’s internal strategies in case of adverse effects of external factors on the internal environment would, in this case, be focused on ensuring that staff productivity is increased while also minimizing costs to remain competitive (Wijngaarden, 2012). Thus, the hospital should ensure that its internal operations are drafted in relation to its internal environment to contribute to its competitiveness. Lower margins mean that the hospital cannot increase wages for most workers and, therefore, the hospital must come up with innovative strategies to maintain their competitiveness for experienced and skilled staff. Internal factors influence the drafting of competitive strategies, especially in order to ensure that the internal operations contribute to and strengthen the hospital’s competitive advantage. The organizational culture, especially in relation to the attitudes of the hospital’s staff and their ability to be dedicated to their work and go ‘the extra mile’ has a significant influence on the hospital’s competitive strategy (Wijngaarden, 2012). Positive attitudes, for instance, may be leveraged by the hospital to improve consumers, thus basing their competitive strategy on quality healthcare services. Organizational Strategy in Maintaining and Maintaining Competitiveness One strategy that hospital management may use to maintain competitive advantage in light of the above internal and external factors is through implementing learning and development, specifically for their employees. The hospital’s ability to implement such a strategy in response to external and internal influences is critical to the institution’s competitiveness and survival (Lo, 2013). Involving employees in the change process resulting from dynamics in the hospital’s environment requires managerial leadership, especially in dealing with poor morale and staff turnover. Managers, therefore, must maintain an open line of communication with employees, allowing them to verbalize their concerns about changes, as well as to understand how this change impacts on them, their departments, and organization. This, in turn, provides the basis for learning and development strategies to enable the employees better adapt to the changing environment. Educating the staff on current local and national factors, as well as how these factors impact on the internal environment, is one way for managers to ensure that the hospital’s competitiveness is not harmed by environmental factors that come as a surprise to the employees (Lo, 2013). Conclusion Hospital administrators and management are expected to be always aware of internal and external environmental factors that influence the hospital, particularly in order to define a pro-active action plan to anticipate threats to the hospital’s competitiveness. Two of the most important external factors that influence the hospital include political and economic factors. In this case, decisions made at the state and federal level has direct and indirect effects on the operations of the hospital. In addition, lower profit margins due to reimbursement changes and organizational culture also affect the organization. These factors influence the hospital’s competitive strategy by affecting business growth and service delivery. Learning and development strategies may be used to counter these effects. References Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2013). Strategic management of health care organizations. San Francisco, CA: Jossey-Bass, Wiley. Healey, B. J., & Marchese, M. C. (2012). Foundations of health care management: Principles and methods. San Francisco: Jossey-Bass. Lo, F. Y. (2013). The dynamic adjustment of environment, strategy, structure, and resources on firm performance. International Entrepreneurship and Management Journal, 9(2), 217-227 Noh, J. W., Kwon, Y. D., Yoon, S. J., & Hwang, J. I. (2011). Internal and external environmental factors affecting the performance of hospital‐based home nursing care. International nursing review, 58(2), 263-269 Wijngaarden, J. D., Scholten, G. R., & van Wijk, K. P. (2012). Strategic analysis for health care organizations. The International journal of health planning and management, 27(1), 34-49 Read More